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Housing Values Rise to 5.6 trillion

Posted by Tom Magor in Mortgages on 14 December 2016 - Tom is a Senior Credit Analyst at checkmyfile.

While housing prices have displayed a consistent rise over the past several years, according to a recent study conducted by Halifax, the total value of privately owned housing in the UK has exceeded £5.5 trillion for the first time.

Over the course of the last decade, the total value has grown by £1.9 trillion to £5.6 trillion, representing a rise of more than 50%. This considerably surpasses the retail price index which increased by 33% during the same period. The average UK house price currently stands at approximately £241,000, up from £174,000 in 2006, a 39% rise.

Martin Ellis of Halifax says, “A combination of higher house prices and an increase in the number of privately owned homes has seen the value of housing stock grow by £1.9 trillion in the past decade. Overall housing equity held by UK households is in a healthy state, with total housing assets worth over £4.2 trillion more than the value of mortgage debt. Housing equity has grown by £1.6 trillion since 2006. For almost one in three homeowners, who own their home with no outstanding mortgage debt, their financial position is even stronger.”

Perhaps unsurprisingly, total mortgage debt has increased by 25% over the last decade, from £1.1 trillion to £1.3 trillion. However, the value of private housing stock has increased by more than 7 times as much over the course of the same period.

However, there have been variations in the level of growth throughout different areas of the country. The north-south divide has further widened since 2006 with the value of housing in the south increasing more than twice as fast than in the north. As a result, the proportion of total housing assets held by those residing in the south increased from 55% in 2006 to 62% in 2016.

When focusing on the capital, the share of private housing wealth in London has increased from 30% to 37% over the last 10 years. To illustrate the considerable influence of the London property market, the total value of private residential housing in the capital is 14 times greater than Northern Ireland, which at £87bn, is the lowest in the UK.

The vast majority of mortgage providers keep their lending criteria a closely-guarded commercial secret, which makes figuring out your chances of getting accepted for mortgage tricky, though a mortgage broker may be able to point you in the right direction based on your credit history.

When you apply for a mortgage there are probably nuggets of advice you’ve heard time and time again to make sure you increase your chances of getting accepted; like using a credit card to build up a credit history if you haven’t borrowed much in the past, or getting an agreement in principle to give you an idea of how much you’re likely to be able to borrow.

Even for homeowners that have been through the process before, applying for a mortgage can be a lengthy and often stressful process. For anyone with a history of adverse credit, it can be even more disconcerting - especially if you’re not sure how negative information on your Credit Report such as late payments, Defaults, or Court Information might affect a potential mortgage lenders’ decision.

Getting your mortgage Agreed in Principle (also known as a Decision in Principle or AIP) is an important step towards finally getting into a new home, but the relief of getting an AIP can be short-lived if you then get turned down when applying for the actual mortgage.

Before the Credit Crunch of 10 years ago, finding a mortgage valued up to 95% or even 100% LTV and at more than five times your salary level wasn’t difficult - in fact it’s since become clear that it was too easy and was a financial disaster waiting to happen. As such, mortgages have become harder to get accepted for then, with stricter regulations coming into place ensuring that mortgages are only granted to those who can truly afford them.

A lot of customers come to checkmyfile because they plan on applying for a mortgage – your Credit Report is, after all, the best place to start as it’s helpful on more than one occasion. But often the question is often raised: "what Credit Score will I need to get a mortgage for my dream home?”

Guarantor lenders are always keen to point out that you don’t need a credit check to take out one of their loans, just a friend or family member who has a good credit history that is able to act as a guarantor. For those with a poor credit rating, this type of loan provides a solution to a problem – they can afford the loan repayments but are unable to get credit due to prior adverse credit history.

Homeownership among 25 year olds has more than halved in the last 20 years, according to a survey conducted for the Local Government Association (LGA). The study carried out by Savilles the estate agents found that only 20% of 25 year olds now own a home of their own, compared to 46% in 1996.

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